Liberty Latin America Reports Q3 2021 Results

Continued subscriber momentum; 158,000 fixed and mobile additions in Q3

Revenue up 32% YTD driven by Puerto Rico acquisition, rebased revenue up 4%

Strong YoY growth in cash flows from operating activities and Adjusted FCF

~600,000 homes passed or upgraded YTD; 99% fiber-to-the-home

Announced Panama and Chile transactions; anticipate significant synergies

Liberty Latin America Ltd. (“Liberty Latin America” or “LLA”) (NASDAQ: LILA and LILAK, OTC Link: LILAB) today announced its financial and operating results for the three months (“Q3”) and nine months (“YTD”) ended September 30, 2021.

CEO Balan Nair commented, “Since reporting our first half results in August, we have made significant progress with our strategic objectives and enhanced our medium-term prospects through operational improvements and accretive M&A transactions.”

“From an organic perspective, we have continued to generate healthy fixed subscriber growth with 84,000 RGU additions in the third quarter, including positive contributions from each of our reporting segments. Panama had a particularly strong performance, adding more subscribers in the third quarter than the first half of the year as we gained traction with our broadband-led bundled propositions. In mobile, we grew our base by 74,000 subscribers, with postpaid representing approximately half of the additions.”

“The penetration of fixed and mobile data services remains relatively low across our markets and we are committed to investing in our networks and product offerings to deliver greater access to high-speed connectivity solutions for our customers. In the year-to-date period, we added or upgraded approximately 600,000 homes.”

“Our cash flow from operations and Adjusted Free Cash Flow, in the first nine months of the year, were $718 million and $149 million, respectively, representing strong growth year-over-year, and we are on-track to exceed our 2021 Adjusted Free Cash Flow guidance of approximately $200 million. We also doubled our share repurchase activity in Q3 as compared to Q2.”

“Our inorganic strategy is an important driver of value creation and we were pleased to complete the acquisition of Telefónica's Costa Rica operations as well as announcing the acquisition of América Móvil's Panama business and a 50/50 joint venture with América Móvil in Chile, both of which are expected to close next year. These transactions will enable us to improve our networks and customer propositions, including completing our product portfolios to create converged businesses in Costa Rica and Chile, while also generating significant synergies.”

“As we approach the end of the year, we are focused on delivering our guidance targets and establishing a platform for sustained organic growth across our operations. We are also working diligently to integrate the operations we have acquired in Puerto Rico and Costa Rica as well as to close the transactions announced in Panama and Chile. We remain confident that together, these actions will create additional value and position us to deliver higher Adjusted Free Cash Flow in the coming years.”

Business Highlights

• C&W Caribbean & Networks: solid operating and financial performance
  • Q3 fixed and mobile additions of 49,000 driven by continued growth in Jamaica
  • YTD reported and rebased Adj. OIBDA growth of 4% and 5%, respectively

• C&W Panama: improving fixed momentum; financial recovery from 2020 COVID-19 impacts
  • RGU additions of 30,000 in Q3, higher than H1 performance
  • Strong YTD reported and rebased Adj. OIBDA growth of 9% and 10%, respectively

• Liberty Puerto Rico: fixed and mobile postpaid subscriber additions; new brand launched
  • Fixed subscriber growth driven by broadband; strong mobile postpaid additions
  • Unified brand for Liberty Puerto Rico fixed and mobile operations launched in September

• VTR: Adjusted OIBDA in CLP stable sequentially; market remains highly competitive
  • 50/50 JV agreed with América Móvil to create a full-service, scale operator in Chile
  • Added ~125,000 new build / upgraded homes in the quarter

• Costa Rica: quad-play operator following acquisition of Telefónica Costa Rica's operations
  • Record Q3 performance with 12,000 RGU additions led by broadband
  • Strong start for mobile operations, adding 37,000 subscribers in Q3

Reconfirming LLA 2021 Financial Guidance

• P&E additions as a percentage of revenue at ~18%
• Adding or upgrading over 700,000 homes
• Adjusted FCF guidance of ~$200 million

Additional information, including historic quarterly revenue, adjusted OIBDA, and P&E additions under our updated reporting segments, can be found on our website at https://www.lla.com/investors.

Financial and Operating Highlights

Revenue Highlights

The following table presents (i) revenue of each of our segments and corporate operations for the periods indicated, and (ii) the percentage change from period-to-period on both a reported and rebased basis:

N.M. – Not Meaningful.

• Our reported revenue for the three and nine months ended September 30, 2021 increased by 34% and 32%, respectively.

• Reported revenue growth in Q3 2021 and YTD 2021 was driven by (1) the addition of $232 million and $708 million, respectively, from Liberty Mobile, which was acquired on October 31, 2020, (2) $41 million for each comparative period from the acquisition of Telefónica's Costa Rica operations on August 9, 2021, (3) organic growth across Liberty Puerto Rico, C&W Caribbean & Networks and C&W Panama, (4) organic declines at VTR and (5) net foreign exchange (“FX”) impacts of ($5 million) and $24 million, respectively.

Q3 2021 Revenue Growth – Segment Highlights

• C&W Caribbean & Networks: revenue grew on a reported and rebased basis by 3% and 4%, respectively. The lower reported growth was primarily driven by adverse currency movements.

• B2B revenue was 2% and 3% higher on a reported and rebased basis, respectively, as compared to the prior-year period. Performance was driven by growth in revenue from fixed and mobile B2B services and increased demand for capacity over our subsea network as economic activity continues to steadily recover.
• Fixed residential revenue grew by 2% and 3% on a reported and rebased basis, respectively, as compared to the prior-year period. Our investments to expand and upgrade our networks are helping to drive volume growth which was the driver of performance. Within the segment, Jamaica was once again the largest contributor, adding 24,000 RGUs in the quarter and 100,000 RGUs over the past twelve months.
• Mobile was the best performing product in the quarter, as revenue rose by 8% on a reported basis and 9% on a rebased basis, as compared to the prior-year period. Growth was driven by higher average numbers of mobile subscribers, mostly due to sales initiatives, including converged offerings.

• C&W Panama: revenue increased by 8% on a reported basis and 9% on a rebased basis.

• B2B revenue was 15% higher on a reported and rebased basis, primarily due to increased revenue related to long-term projects, including Government-related projects, and growth in mobile services revenue.
• Fixed residential revenue was 9% and 10% higher on a reported and rebased basis, respectively. This was driven by volume growth as we added 70,000 subscribers in the past twelve months, and gained traction with our high-speed data propositions.
• Mobile revenue grew by 2% on a reported and rebased basis. Subscription revenue was relatively flat year-over-year as growth in subscribers was offset by lower prepaid ARPU as we stopped providing certain value-added services. Non-subscription revenue grew through handset sales and increased inbound roaming as travel restrictions related to COVID-19 were relaxed.

• Liberty Puerto Rico: revenue grew by 214% and 2% on a reported and rebased basis, respectively. Reported growth benefited from the inclusion of Liberty Mobile in the quarter. Rebased revenue performance was driven by double-digit growth in our legacy fixed operations partly offset by a decline at Liberty Mobile as subscription revenue growth was offset by lower equipment, B2B and roaming revenue year-over-year.
• VTR: revenue was 4% and 5% lower on a reported and rebased basis, respectively. While our fixed subscriber base was stable over the last quarter, competitive pressures have led to declines in subscribers and ARPU levels over the last twelve months, negatively impacting year-over-year performance.
• Costa Rica: revenue grew by 119% and 11% on a reported and rebased basis, respectively. Reported growth benefited from the inclusion of Telefónica's Costa Rica operations for part of the quarter. The double-digit rebased increase was driven by volume growth in both our mobile and fixed businesses.

Operating Income (Loss)

• Operating income (loss) was $137 million and $87 million for the three months ended September 30, 2021 and 2020, respectively, and $476 million and ($12 million) for the nine months ended September 30, 2021 and 2020, respectively.

• We reported higher operating income during three and nine months ended September 30, 2021, as compared with the corresponding periods during 2020, primarily due to increases in Adjusted OIBDA, as further discussed below, and for the nine-month comparison, lower impairment, restructuring and other operating items, net. During the third quarter of 2020, we incurred goodwill impairment charges totaling $279 million at C&W Panama and various reporting units within the C&W Caribbean and Networks segment. These improvements were partially offset by higher depreciation and amortization.

Adjusted OIBDA Highlights

The following table presents (i) Adjusted OIBDA of each of our reportable segments and our corporate category for the periods indicated, and (ii) the percentage change from period-to-period on both a reported and rebased basis:

• Our reported Adjusted OIBDA for the three and nine months ended September 30, 2021 increased by 24% and 29%, respectively.

• Reported Adjusted OIBDA increases in Q3 2021 and YTD 2021 were largely driven by (1) the addition of $77 million and $261 million, respectively, contributed by Liberty Mobile, and (2) organic growth in Liberty Puerto Rico, C&W Caribbean & Networks, and C&W Panama. These increases were partially offset by declines in VTR.

Q3 2021 Adjusted OIBDA Growth – Segment Highlights

• C&W Caribbean and Networks: Adjusted OIBDA increased on a reported and rebased basis by 2% and 3%, respectively. Rebased growth was driven by the aforementioned rebased revenue performance. Direct costs increased year-over-year due to higher volumes of traffic across our networks. Other operating costs and expenses were also higher, as compared to the prior-year period, due to network-related costs, including the impact of subsea cable repairs, and promotional activity which increased commercial costs.
• C&W Panama: Adjusted OIBDA was 11% higher on a reported and rebased basis. Performance was driven by revenue growth and management of other operating costs and expenses, which remained flat year-over-year. Direct costs increased due to higher equipment sales and non-recurring project revenue. Our Adjusted OIBDA margin improved by 100 basis points (on a reported basis) year-over-year.
• Liberty Puerto Rico: reported and rebased Adjusted OIBDA growth of 145% and 3%, respectively. Reported growth was driven by the inclusion of Liberty Mobile in the quarter. Rebased performance was driven by the previously mentioned revenue growth, partly offset by the net impact of higher: mobile roaming expenses, video programming rates, and labor costs; and lower equipment costs. We incurred integration costs of $2 million related to the Liberty Mobile acquisition in the quarter mainly related to our rebranding, and expect to incur approximately $10 million of additional integration costs in the fourth quarter.
• VTR: Adjusted OIBDA declined by 18% on both a reported and rebased basis. The rebased decline was driven by the aforementioned revenue decline and higher costs. Direct costs increased year-over-year driven by higher programming expenses as live soccer matches returned following cancellations due to COVID-19 in the prior year. Other operating costs and expenses were relatively flat on a rebased basis as lower bad debt provisions year-over-year and cost savings from a restructuring program earlier in the year were offset by increased network and commercial activities.
  • Relative to Q2, we had a modest increase in Adjusted OIBDA in local currency.
• Costa Rica: reported Adjusted OIBDA growth of 74% and rebased growth of 13%. Reported growth benefited from the inclusion of Telefónica's Costa Rica operations in the quarter. Our rebased performance was driven by the aforementioned revenue growth.

Net Earnings (Loss) Attributable to Shareholders

• Net earnings (loss) attributable to shareholders was $78 million and ($85 million) for the three months ended September 30, 2021 and 2020, respectively, and $170 million and ($658 million) for the nine months ended September 30, 2021 and 2020, respectively.

Property & Equipment Additions and Capital Expenditures

The table below highlights the categories of the property and equipment additions (P&E Additions) for the indicated periods and reconciles to cash paid for capital expenditures.

Summary of Debt, Finance Lease Obligations and Cash and Cash Equivalents

The following table details the U.S. dollar equivalent balances of the outstanding principal amounts of our debt and finance lease obligations, and cash and cash equivalents at September 30, 2021:

1. Represents the amount held by Liberty Latin America on a standalone basis plus the aggregate amount held by subsidiaries of Liberty Latin America that are outside our borrowing groups.
2. Represents the C&W borrowing group, including the C&W Caribbean & Networks and C&W Panama reporting segments.
3. Represents the debt and finance lease obligations of the VTR borrowing group, which are classified as held for sale on our September 30, 2021 condensed consolidated balance sheet. The cash and cash equivalents amount also includes $154 million that is included in assets held for sale on our September 30, 2021 condensed consolidated balance sheet. In addition, the consolidated leverage and liquidity information includes the impact of the VTR borrowing group.
4. Consolidated leverage ratios are non-GAAP measures. For additional information, including definitions of our consolidated leverage ratios, required reconciliations, see Non-GAAP Reconciliations below.
5. The consolidated leverage ratios include the impact of Telefónica Costa Rica's Adjusted OIBDA for the post-acquisition period, August 9, 2021 to September 30, 2021, and do not include Adjusted OIBDA for the period prior to the close of the acquisition, which would have an estimated impact of 0.2x and 0.1x on the consolidated gross and net leverage ratio, respectively.
6. For purposes of calculating our average tenor, total debt excludes vendor financing and finance lease obligations.
7. At September 30, 2021, the full amount of unused borrowing capacity (inclusive of $256 million related to VTR) under our subsidiaries' revolving credit facilities was available to be borrowed, both before and after completion of the September 30, 2021 compliance reporting requirements. For information regarding limitations on our ability to access this liquidity, see the discussion under “Material Changes in Financial Condition” in our recently filed Quarterly Report on Form 10-Q.

Quarterly Subscriber Variance

1. Costa Rica's non-organic adjustment relates to the addition of mobile subscribers on August 9, 2021 following the close of the Telefónica Costa Rica acquisition.

C&W Caribbean & Networks

• Fixed additions led by Jamaica with 24,000 RGUs added in the quarter and 100,000 over the last twelve months. Majority of additions through broadband internet.
• Mobile subscribers were 24,000 higher, led by Jamaica which had the most additions in the quarter.

C&W Panama

• Panama added 30,000 RGUs in Q3 through sales of bundled propositions. Best quarter of the year and represented more additions than the first and second quarters combined.
• Mobile business continued to grow its base, adding 24,000 subscribers.

Liberty Puerto Rico

• Fixed additions of 13,000 RGUs showed continuing momentum in Puerto Rico with growth led by increased broadband penetration.
• Liberty Mobile's overall base decreased by 3,000 subscribers however the postpaid base grew by 14,000.

VTR

• VTR's fixed RGU base was stable in the quarter. We continue to expand our footprint in Chile with a focus on differentiated customer service and products.
• Mobile subscribers declined by 7,000 in Q3.

Costa Rica

• RGU additions of 12,000, our best ever Q3 performance and over three times higher than the prior-year quarter additions as broadband penetration continued to drive the business.
• Telefónica Costa Rica's subscriber figures are included for the period since its acquisition on August 9, 2021. During this time, we added 37,000 subscribers.

ARPU per Customer Relationship

The following table provides ARPU per customer relationship for the indicated periods:

Mobile ARPU

The following table provides ARPU per mobile subscriber for the indicated periods:

N.M. – Not Meaningful.

1. The FX-Neutral change represents the percentage change on a year-over-year basis adjusted for FX impacts and is calculated by adjusting the current-period figures to reflect translation at the foreign currency rates used to translate the prior year amounts.
2. ARPU per customer relationship for the three months ended September 30, 2020 has been revised to exclude revenue and customer relationships associated with the DTH operations in Panama that were shut down in January 2021.
3. The ARPU per customer relationship amounts in Chilean pesos for the three months ended September 30, 2021 and 2020 are CLP 31,573 and CLP 31,173, respectively.
4. The ARPU per customer relationship amounts in Costa Rican colones for the three months ended September 30, 2021 and 2020 are CRC 25,861 and CRC 25,188, respectively.
5. The amount for the three months ended September 30, 2020 does not include the revenue and mobile subscribers of Liberty Mobile or Telefónica Costa Rica as these businesses were acquired on October 31, 2020 and August 9, 2021, respectively. Excluding Liberty Mobile and Telefónica Costa Rica, ARPU would have decreased year-over-year by 6.2% on a reported basis and 5.5% on an FX-Neutral basis during the three months ended September 30, 2021.
6. The mobile ARPU amounts in Chilean pesos for the three months ended September 30, 2021 and 2020 are CLP 11,288 and CLP 12,148, respectively.
7. The mobile ARPU amount in Costa Rican colones for the three months ended September 30, 2021 is CRC 3,321.

Forward-Looking Statements and Disclaimer

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our strategies, priorities and objectives, performance and guidance, growth expectations, and Adjusted Free Cash Flow expectations for 2021; expected new build and upgrade activity in 2021 and estimated P&E additions as a percent of revenue; our digital strategy, product innovation and commercial plans and projects; expectations on demand for connectivity in the region; our anticipated integration plans, synergies, opportunities and integration costs in Puerto Rico following the AT&T Acquisition and in Costa Rica following the acquisition of Telefónica's Costa Rica business; the timing and impact of the acquisition of América Móvil’s Panama operations and the formation of a joint venture with América Móvil in Chile; the strength of our balance sheet and tenor of our debt; and other information and statements that are not historical fact. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include events that are outside of our control, such as hurricanes and other natural disasters, political or social events, and pandemics, such as COVID-19, the uncertainties surrounding such events and efforts to contain any pandemic, the ability and cost to restore networks in the markets impacted by hurricanes or generally to respond to any such events; the continued use by subscribers and potential subscribers of our services and their willingness to upgrade to our more advanced offerings; our ability to meet challenges from competition, to manage rapid technological change or to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers; the effects of changes in laws or regulation; general economic factors; our ability to obtain regulatory approval and satisfy conditions associated with acquisitions and dispositions, including the acquisition of América Móvil’s Panama operations and the formation of a joint venture with América Móvil in Chile; our ability to successfully acquire and integrate new businesses and realize anticipated efficiencies from acquired businesses; the availability of attractive programming for our video services and the costs associated with such programming; our ability to achieve forecasted financial and operating targets; the outcome of any pending or threatened litigation; the ability of our operating companies to access cash of their respective subsidiaries; the impact of our operating companies' future financial performance, or market conditions generally, on the availability, terms and deployment of capital; fluctuations in currency exchange and interest rates; the ability of suppliers and vendors (including our third-party wireless network provider under our MVNO arrangement) to timely deliver quality products, equipment, software, services and access; our ability to adequately forecast and plan future network requirements including the costs and benefits associated with network expansions; and other factors detailed from time to time in our filings with the Securities and Exchange Commission, including our most recently filed Form 10-K and Form 10-Q. These forward-looking statements speak only as of the date of this press release. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

About Liberty Latin America

Liberty Latin America is a leading communications company operating in over 20 countries across Latin America and the Caribbean under the consumer brands VTR, Flow, Liberty, Más Móvil, BTC, and Cabletica. The communications and entertainment services that we offer to our residential and business customers in the region include digital video, broadband internet, telephony and mobile services. Our business products and services include enterprise-grade connectivity, data center, hosting and managed solutions, as well as information technology solutions with customers ranging from small and medium enterprises to international companies and governmental agencies. In addition, Liberty Latin America operates a subsea and terrestrial fiber optic cable network that connects over 40 markets in the region.

Liberty Latin America has three separate classes of common shares, which are traded on the NASDAQ Global Select Market under the symbols “LILA” (Class A) and “LILAK” (Class C), and on the OTC link under the symbol “LILAB” (Class B).

For more information, please visit www.lla.com.

Footnotes

1. Rebased growth rates are a non-GAAP measure. The indicated growth rates are rebased for the estimated impacts of (i) acquisitions, (ii) dispositions and (iii) FX. See Non-GAAP Reconciliations below.
2. Adjusted OIBDA is a non-GAAP measure. For the definition of Adjusted OIBDA and required reconciliations, see Non-GAAP Reconciliations below.
3. Adjusted Free Cash Flow (“Adjusted FCF”) is a non-GAAP measure. For the definition of Adjusted FCFand required reconciliations, see Non-GAAP Reconciliations below.
4. See Glossary for the definition of RGUs and mobile subscribers. Organic figures exclude RGUs and mobile subscribers of acquired entities at the date of acquisition and other nonorganic adjustments, but include the impact of changes in RGUs and mobile subscribers from the date of acquisition. All subscriber / RGU additions or losses refer to net organic changes, unless otherwise noted.
5. The FX-Neutral change represents the percentage change on a year-over-year basis adjusted for FX impacts and is calculated by adjusting the current-year figures to reflect translation at the foreign currency rates used to translate the prior year amounts.

Additional Information | Cable & Wireless Borrowing Group

The following tables reflect preliminary unaudited selected financial results, on a consolidated C&W basis, for the periods indicated, in accordance with U.S. GAAP.

The following table details the U.S. dollar equivalent of the nominal amount outstanding of C&W's third-party debt, finance lease obligations and cash and cash equivalents:

• In October 2021, we entered into a new $590 million term loan facility with an interest rate of LIBOR plus 3.00%, due in 2029 (the C&W Term Loan B-6 Facility). The net proceeds from the C&W Term Loan B-6 Facility were primarily used to (i) redeem in full, $500 million of aggregate principal amount under the 2026 C&W Senior Notes at a redemption price of 103.75% and (ii) redeem $55 million of aggregate principal amount under the 2027 C&W Senior Secured Notes at a redemption price of 103%.
• At September 30, 2021, our third-party total and proportionate net debt were each $3.6 billion, our Fully-swapped Borrowing Cost was 5.5%, and the average tenor of our debt obligations (excluding vendor financing) was approximately 5.7 years.
  • Pro forma for the most recent refinancing transaction closed in early October, the Fully-swapped Borrowing Cost would have been 5.1%, and the average tenor of our debt obligations (excluding vendor financing) would have been approximately 6.1 years, at September 30, 2021.
• Our portion of Adjusted OIBDA, after deducting the noncontrolling interests' share, (“Proportionate Adjusted OIBDA”) was $194 million for Q3 2021 and $190 million for Q3 2020.
• Based on Q3 results, our Proportionate Net Leverage Ratio was 4.3x, calculated in accordance with C&W's Credit Agreement. At September 30, 2021, we had maximum undrawn commitments of $790 million, including $160 million under our regional facilities. At September 30, 2021, the full amount of unused borrowing capacity under our credit facilities (including regional facilities) was available to be borrowed, both before and after completion of the September 30, 2021 compliance reporting requirements.

Liberty Puerto Rico (LPR) Borrowing Group

The following table details the nominal amount outstanding of Liberty Puerto Rico's debt, finance lease obligations and cash and cash equivalents: